The Magic Equation for Streaming Creators to Be Paid Fairly Is Actually Quite Simple

As more streaming services begin to turn a profit, Simon Brown and Adrian Wills want to see IP owners and content creators get their fair share. The BBC Studios executives-turned-consultants want agencies and studios to “be bold” in negotiations, and to use the strength of the numbers found in their proprietary Content Valuation Report.

The basic pitch, as presented to IndieWire, goes like this:

Wills: “It’s very likely you’re being underpaid by your streaming partner.”

Brown: That goes double for indie creators, who often live a “hand-to-mouth” existence.

The problem? Streamers “are not minded to be generous.” (The Brits are so polite.)

The fix is not complicated.

“What we’ve done, quite deliberately, is [created] the simplest formula possible so that when you’re in negotiations there is the smallest amount of subjectivity in this as possible,” Brown said via Zoom. “So when you’ve got Netflix on the other side of the table, it’s kind of A times B.”

Here, “A” refers to a streamer’s subscriber revenue from the moment a specific show has landed on its platform, and “B” is the program’s contribution to total viewership. Subscriber revenue is generally a publicly-available number, and the guys use Digital-i data for viewership. Digital-i tracks streaming views and counts major streamers among its clients. Though early days, Brown and Wills say they have signed NDAs with a media law firm “representing major talent and an industry body,” and are “in discussions with talent agencies like CAA, international distributors like Fremantle, All3 Media, Banijay and Avalon, and other rights holders.”

Should “A” not be publicly available, Brown and Wills use the 20,000-home Digital-i panel’s average monthly payments to reverse engineer a streamer’s ARPU (average revenue per user).

An example, taken directly from Brown and Wills’ pitch deck: “Drama X” (we know what series it is but can’t say) airs on Netflix and accounted for about 0.424 percent (B) of all worldwide viewing during a period in which the streamer brought in $56.69 billion (A) in subscription revenue. A times B tells us that “Drama X” alone had a sub value of about $240 million for the streamer.

As Brown and Wills know, Netflix cannot actually pay out every dollar it earns, so the $240 million is a dream number, the “cap” in their “cap and collar” approach. In an alternate version of this equation, the guys substitute a streamer’s content spend over the same period for “A” (instead of subscription revenue) while “B” (percent of viewership) remains the same. If the total content spend was $25.8 billion, then at least $110 million of the overall content budget should have gone to “Drama X.”

Now you have a high number and a low number — let the negotiations begin.

There are some other factors to push the collar toward the cap, like the actual number of new subscribers that joined the service within the window, the series’ engagement or completion rate, and how effective the program has been in preventing churn. Plus, dramas are worth more, returning titles are more valuable than new greenlights, etc.

The guys prefer not to muddy the waters too much. The “less empirical” the data becomes, Brown said, “the ice gets thinner that you’re standing on.” When negotiating with the mighty streamers, rights holders are already on un-solid ground.

The approach may not be a genius one, but the guys (and most creators) say such a change is long overdue — especially in the U.S., a market they’re soon hoping to crack. The EU has stronger regulations than we do. It also has some truly underpaid content. (“UK content way, way punches above its weight in terms of bang for buck,” Wills said.)

We may not have the same level of regulation here in the states, but the payout issue looms just as large. Just last year, writers and actors went on strike with streaming payouts among their respective guilds’ primary concerns. Those negotiations were primarily focused on backend payments, as streaming has effectively replaced syndication but certainly not its financial rewards. You can bet on those not being the last time labor and studios battle over streaming contracts.

Recent woefully undervalued series include “Fool Me Once” and “Baby Reindeer.” Of course, surprise smash hits are always going to underpay — residual payments are another matter entirely — but the successes could be applied to future collaborations.

The guys are also “anecdotally aware” of what they called “significant underpayment” for “Peaky Blinders,” the BBC series now on Netflix. “Peaky Blinders” drew “on the lower end of hundreds of millions of dollars of revenue” for Netflix, per their equation, but didn’t make anywhere near that. Nobody tell Tommy Shelby.